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India and the European Union (EU) are in the final stages of concluding a historic free trade agreement (FTA), frequently described by Indian officials as the "mother of all trade deals". Negotiations are being fast-tracked with the goal of reaching a deal before the India-EU Summit scheduled for January 27, 2026, in New Delhi.
Negotiators have reportedly closed 20 out of 24 chapters of the agreement.
Both sides are working daily to finalize the remaining four chapters ahead of the summit on January 27, where EU leaders—including the Presidents of the European Council and Commission—will attend as chief guests for India's Republic Day.
The deal is part of a broader "strategic convergence" that includes a separate Investment Protection Agreement and a pact on Geographical Indications.
A. Key Areas of Agreement and Gain:
1. Indian Exports: India is seeking zero or reduced duties for labor-intensive sectors such as textiles and garments (currently facing 12–16% tariffs), gems and jewelry, footwear, and pharmaceuticals.
2. European Exports: The EU is expected to gain significant market access for automobiles, medical devices, and beverages (wine and spirits).
3. Services: Major gains are expected in services like IT, telecommunications, and professional consulting.
B. Remaining Sticking Points:
1. Carbon Tax (CBAM): India has raised serious concerns regarding the EU’s Carbon Border Adjustment Mechanism, which could impose levies on Indian exports of steel, aluminum, and iron.
Agriculture: While some farm goods may be included, India has declared most agriculture and dairy products a "red line" to protect domestic farmers, and these have largely been kept out of the current deal.
2. Automobile Tariffs: Disagreements persist over the depth of tariff cuts for European car imports into India.
C. A Fundamentally Altered Geopolitical Context & Landscape:
The deal has gained urgency as both regions seek to diversify supply chains and reduce reliance on China and Russia while also trying to offset the impact of Trump's tariff wars which have impacted the exports of both nations, especially EU given that the U.S. is its largest trading partner & export market historically.
Additionally, stalled trade talks between India and the United States have further motivated New Delhi to fast track and finalize the EU pact.
